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New York State Life Beneficiaries File COVID-19 Grace Period Suit

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What You Need to Know

  • The plaintiffs in the case are seeking class-action status.
  • New York gave insureds facing pandemic-related financial problems extra time to pay their premiums.
  • The insurer that wrote the coverage says it took steps to comply with the New York requirements. and keep policyholders informed about grace period changes.

A new lawsuit could show how federal courts will handle disputes over emergency insurance rules that states developed in response to the COVID-19 pandemic.

The plaintiffs, who are seeking class-action status, are suing Northwestern Mutual Life Insurance Co, in connection with how the company communicated with a life insurance policyholder over New York state’s pandemic-related grace period extension.

A grace period gives the policyholder extra time to pay the premiums when a policy is about to lapse.

Northwestern Mutual says it took steps to comply with New York’s grace period extension.

The lead plaintiffs, Adam Drucker and Allyson Drucker, say the company told a policyholder insured, Craig Drucker, about the extension without explaining that he was still eligible to use the extension.

What It Means

If you try to help clients with life insurance claim disputes, you need to keep an eye on court news to make sure you understand the implications of grace period extension cases.

The Case

A team of lawyers with the Boonswang Law Firm, a firm in Philadelphia, have filed the suit, Adam Drucker and Allyson Drucker, individually and on behalf of all others similarly situated, vs. Northwestern Mutual Life Insurance Company (Case Number 1:22-cv-05106), in U.S. District Court for the Southern District of New York.

The lead plaintiffs were the beneficiaries of a 20-year term life policy purchased by a chiropractor, Craig Drucker, in 2004.

The policy had a $1 million face value.

Linda Lacewell, a former New York state financial services superintendent, implemented pandemic-related insurance rule changes on March 30, 2020. The update included provisions giving life insurance policyholders and annuity contract holders 90 more days than normal to make the payments required to keep their policies and contracts in force.

Craig Drucker ran into problems with paying for his life insurance because of pandemic-related lockdowns, according to the complaint.

Northwestern Mutual sent him a premium payment notice on March 15, 2020, and told him the payment was due April 16, 2020.

The company then sent him two letters on May 19, 2020. One letter said he had a 90-day extension on his payment grace period, and the second said his policy had lapsed.

Because of the letter saying the policy had lapsed Drucker did not understand that he had access to a 90-day lapse period or the right to use a 12-month payment plan to pay his premiums, according to the complaint.

Drucker caught COVID-19 in December 2020 and died from complications of the disease on Feb. 3, 2021.

The plaintiffs say they believe that other policyholders and beneficiaries have been affected by the same communication problems, and that a class action would be the most efficient way to adjudicate the claims.

They are asking the court to award a 90-day grace period extension to all policyholders affected by unclear communications about the extension, and an opportunity to keep their coverage in force.

The Insurer’s Response

Northwestern Mutual told Adam Drucker and Allyson Drucker that it had followed all New York state grace period requirements and had provided the proper grace period, according to the Drucker complaint.

“We are aware of the complaint and will be reviewing the allegations,” a company spokeswoman said Wednesday in an email. “I can confirm that Northwestern Mutual took many steps to help policyowners and keep them informed in response to the special circumstances brought about by the pandemic, including the steps required by New York.”

(Image: Adobe Stock)